First time homebuyer finance options


We live in a time like no other…we have so many options for so many things, we don’t know where to go or what to choose! Here is a breakdown of what financing options you have for purchasing that first new home:

1. FHA Loan: The Federal Housing Administration (FHA) insures the mortgage. The FHA is an agency that operates within the U.S. Dept. of Housing and Urban Development (HUD). With the FHA insuring the loan, lenders receive a protection and won’t experience a loss if you default on the mortgage. FHA loans typically come with pretty competitive interest rates, smaller down payment requirements and lower closing costs than conventional loans. With a credit score of 580 or higher, you could be eligible for a loan with a down payment as low as 3.5% of the asking price.

2. USDA Loan: The U.S. Dept. of Agriculture (USDA) focuses on homes in certain rural areas…you won't need to purchase or run a farm to qualify for it either. Through this particular loan, the USDA backs the loan. There may be no upfront costs required, and loan payments are fixed. With a credit score of 620 or higher, typically receive “streamlined processing,” but there are income limitations which can vary based on the area you are purchasing in. 

3. VA Loan: The U.S. Dept of Veterans Affairs (VA) helps service members, veterans, and surviving spouses buy homes. The Veterans Affairs insures a percentage of the loan, which makes it possible for lenders to have some unique features to offer. VA loans offer competitive interest rates and require NO down payment. You might not have to pay for private mortgage insurance (PMI). Also, there is no minimum credit score to qualify. If you have difficulty making the mortgage payments, the VA can negotiate with the lender on your behalf.

4. Good Neighbor Next Door: Sponsored by HUD and focuses on providing housing aid for law enforcement officers, firefighters, and emergency medical technicians as well as pre-kindergarten thru 12th-grade teachers. Through this program, you can receive a discount of 50% off a home’s listed price in specific regions called “revitalization areas.” Using the HUDHomes website, you can look for homes that are for sale in your area. A requirement of the program, you will be committing to living in the home for 36 months. 

5. Fannie Mae or Freddie Mac: These are government-sponsored entities (GSEs). They work with local lenders to offer mortgage options that assist low and moderate income families. Through this option, lenders can offer competitive interest rates and down payment amounts as little as 3% of the purchase price.

6. Energy Efficient Mortgage: This loan type’s purpose is to help you add improvements to your home that will make it more environmentally friendly. The federal government supports this loan by insuring them through FHA or VA programs. The key advantage to this grant is that it allows you to create an energy efficient home without the need for a larger down payment. The amount is rolled into your primary loan.

7. Federal Housing Administration 203 (k): This type of loan, backed by FHA, allows you to purchase a fixer-upper. The FHA values the home considering the improvements that you are going to make. It lets you borrow the funds that you will need to carry out the project and includes them in your primary mortgage.

8. Native American Direct Loan: This program has helped Native American veterans and spouses purchase homes on federal trust lands since 1992. The VA serves as the lender. If eligible, there isn’t a need for a down payment or paying for private mortgage insurance. This first-time homebuyer grant offers low closing costs and a 30-year fixed-rate mortgage.

9. Local First-Time Homebuyer Grants and Programs: In addition to different programs provided by the government, many states and cities offer help for first-time homebuyers. Check your state or city’s website for information on housing aid available in your area, before purchasing a home.

Hopefully, this helps you to understand the different options available to you, the first-time homebuyer.
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